Samir Shah has a unique pedigree in the M&A world. He was previously an owner whose company was successfully sold. And these days he’s with Silicon Valley-based pre-series A venture capital firm Cervin Ventures, specializing in helping founders in the enterprise technology space.
Based on his experience Samir has come up with eight “one-liners” (i.e. rules or words to live by) that should guide every startup.
The first one is a question every entrepreneur should ask before even thinking about starting a business.
You get all the details, and, along the way, find out…
Mentioned in this Episode: www.cervinventures.com
Samir’s 8 One Liners:
1. Is it a feature, a product or a company?
2. If it’s not making a dollar, it’s a hobby.
3. It rains dollars, when their hair is on fire.
4. Don’t sell, make them buy.
5. One good sales person is transformative.
6. Revenue changes everything.
7. Leaky buckets will kill your business.
8. Always go back to the well.
Patrick Stroth: Hello there, I’m Patrick Stroth. Welcome to M&A Masters, where I speak with the leading experts in mergers and acquisitions, and we’re all about one thing here. That’s a clean exit for owners, founders, and their investors.
Today, I’m joined by Samir Shah of Cervin Ventures. Cervin Ventures is the premier Silicon Valley based, pre-series A venture capital firm, focused on enterprise technology. They fill the critical gap between angel investors and traditional VC firms. Prior to joining Cervin Ventures, Samir was founder of Zephyr, a software testing firm which he successfully sold.
So, Samir has been both on the seller side and the buy/investor side of a deal. His experiences led to the development of a list one eight one-liners. Simple, intuitive tools that owners and founders should take to heart. So, Samir has presented these one-liners to multiple audiences here in Silicon Valley, and I’ve asked him to share them with us today. Samir, welcome to the podcast. Thanks for joining me.
Samir Shah: Oh, thanks for having me.
Patrick Stroth: So, to give people some context about this. Why don’t you tell us, what led you to this point in your career with Cervin Ventures?
Samir Shah: Absolutely. Well, I got my masters at Alabama, the University of Alabama, Roll Tide, and I’ve been working in the Valley for the last 20, 25 years at three different companies. About 12 years ago, I started my own company called Zephyr, where we did software test management in the cloud, and it actually turned out to be Cervin Ventures first investment, when they started off.
Had run this for 10 years successfully. I sold it to a private equity firm. Was on the board for a couple of years, then we sold that to a strategic. After which, I got my exec MBA from the Stanford GSB, and now I’m an operating partner at Cervin Ventures.
Patrick Stroth: So, you’ve gone from founder, to now successful investor, and looking at companies from two perspectives, not just one. Why don’t we go ahead and start with your one-liners, one by one. For our audience out there who may be driving or multi-tasking, we will have a list of these one-liners in the show notes as well.
So, sit back and enjoy listening to Samir, and know we’ll have a list of these for you later.
Samir Shah: Fantastic, thanks Patrick. So, let’s get started. My first one, and this is something that I see in our portfolio companies. This is something that I ask every founder should ask of themselves. That is, “Is that a feature, a product, or a company?”
So, when they think of their idea, and are thinking of doing something. They’ve got to seriously ask themselves that question. Is this a feature, a product or a company. I’ve seen a lot of founders coming from large companies that want to solve a problem. What they end up looking at, is saying, “Oh, what if I just add this thing, then people are going to buy.”
Well, it turns out to be more of a feature, rather than a product that somebody would give you money for, or something you can build a company off of. My professor at Stanford used to say, “Do a pre-mortem, not a post-mortem, a pre-mortem of potential failure and successes about your idea in the future.”
If the answer is, “No, this isn’t working.”
Then go back to the drawing board. So, you have to ask yourself this, very, very candidly, “Is this a feature, a product, or a company?”
Patrick Stroth: Very consistent with another bit of advice that I’d heard, is kind of like that, where you say, “Begin with the end in mind.”
Picture what your end point is.
Samir Shah: That’s right.
Patrick Stroth: … And go from there. So, fantastic.
Samir Shah: Right, so let’s go to the second one. The second says, and this is something I take to heart. If it’s not making a dollar, it’s a hobby. Right? Fundamentally, if it’s not making a dollar, it’s a hobby, because you’ve got to get to revenue fast. As fast as you can. Else, what’s going to end up happening is, you’ll fall in love with your startup, you’ll want to make it perfect. You’ll keep its rating, and its rating, and its rating. You won’t be able to really sell anything, and before you know it, it’s become a hobby.
If it’s not bringing you a dollar, remember, it’s a hobby.
Patrick Stroth: One clarification I want to ask on that point is, if it’s making a dollar, does that mean it has to be profitable? Or is it just, you’re getting some kind of revenue in period?
Samir Shah: Oh, no … You should just try to get some revenue going, because once you get revenue going, it changes everything in your world. This is something that I’m going to talk about a little further on, but what that helps you do is validate your idea. People are going to pay money for this, and you know you’re on the right path. However little revenue you’re making.
But, if you never get it in the hands of your user, your customer, if it’s not making any money, then it really is just something you’re tinkering with.
Patrick Stroth: Okay, so you can’t have it sitting on the drawing board in perpetuity. Got you.
Samir Shah: Exactly. The next one’s a little hokey, but bear with me. That is, it rains dollars when their hair is on fire. What I mean by that is, you’ve got to find that use case that will get them to open up their pocketbooks. How do you get to that revenue fast? Well product market fit, for sure. But, real revenue and sustainable revenue, not the early adopter pre-chasm kind of revenue, comes from use cases where your customer’s hair is on fire.
As soon as that happens, oh boy, go out and buy an umbrella, because it’s going to start raining dollars at this point. So yeah, it rains dollars when their hair is on fire.
Patrick Stroth: So, the key here is to find out when you’re meeting a need. Then make that a case study, or find some way to get the word out. That if you’re in this situation, we have the solution.
Samir Shah: Absolutely.
Patrick Stroth: Okay, fantastic.
Samir Shah: The next one is, don’t sell, make them buy. Now, what you have to do here, is you’re to figure out how you don’t have to sell something to them, to your customers, because it’s bloody hard. But, make it such that they really want it. Build something that they want to buy. This isn’t a field of dreams, it sounds easy, but it’s difficult. So, make whatever it is that you are building, make it easy to find, make it easy to try, make it easy to buy. They will flock to you, you won’t have to sell to them anymore.
Patrick Stroth: That could be a real challenge I think, particularly in software, where you have to overcome legacy systems or issues like that. What’s your recommendation there?
Samir Shah: I’ve seen a lot of changes happening the way people are buying software these days. They really don’t want that high-pressure sales situation, where people are hounding them. They want to do this at their own pace. So, make sure you have all the right channels available for them to self-serve. For them to be nurtured, for them to reach out and get themselves to a point where they’re a lot more amenable to buy, than a salesperson hounding them on, “Hey, you’ve got to get this. You’ve got to get this”.
So, there’s a plethora of channels these days that you can deploy, to make sure that your customer gets to that stage. But, end of the day, it all boils down to what your product is, what your service is. If it is killer, if it is something that, going back to the previous one, where there’s a hair on fire use case. They’re going to come to you.
Patrick Stroth: Got you.
Samir Shah: Cool, so then the next one I have is actually, I think on it, it makes obvious sense. But, it’s one good sales person that’s transformative. One good sales person will transform your business, just one. You may have a whole bunch of them, or just one, but if you have a really good one it becomes transformative. What I mean by that is, they will be able to sell. Everybody will start believing in the company.
You will get some sales going. You’ll get confidence amongst your team that, “You know what? What we’re building will really go out there and sell.”
We can start putting a repeatable sales model behind this person, and everything changes once this happens.
Patrick Stroth: So-
Samir Shah: Getting that one good sales person in really changes the game. I’ve seen this happen over, and over, and over again.
Patrick Stroth: And for most companies, probably your first salesman is going to be the founder?
Samir Shah: Absolutely. There can be no better salesperson than the person who came up with the idea. Who’s working very hard. You’ll see, they have the most passion, and they’ll be the most believable amongst all the sales people that you have. You also got to get to a point where you can’t be the only sales person in your company, otherwise you won’t be able to scale. But, those are more growth related issues. This is when you’re right here at the big meeting, how you’ve got to get that one really good sales person.
Patrick Stroth: Got you.
Samir Shah: The next one is actually, I think, the most important one. It’s something that I would stick to my mirror, so that I would look at it every morning before I left home. Just three words, really, really simple. They are, revenue changes everything. Let me repeat, revenue changes everything. It changes the way the board and your investors look at your business. It changes how your team starts to feel about what they’re doing. It changes how your sales people start believing, and the swagger and confidence they have. It changes everything.
You must remember, this is a business. This is a software business, and this is a little pet peeve of mine. Sometimes I want to tell founders to … You know, and stop saying, “Hey, I’m the founder of a startup.”
Or, the CEO of a startup company. I want them to say, “I’m the founder, or CEO, of a software business.”
I know it’s semantics, but it’s an attitude shift toward revenue, profitability, and growth. The word startup, that I’m the CEO of a startup, the connotations are, “I’m trying out something. I’m going to raise money, I’m going to get fancy offices.”
I’m going to do all of this stuff. When you say, “I’m the CEO of a software business.”
Then you’re going to start thinking growth, revenue, profitability, and everybody starts to think of this as a real business. So, revenue really changes everything.
Patrick Stroth: I think that also is key because it’s a completely different mindset when you go from a survival mode to, “Okay, we’re beyond survival now. We’re thriving now. How can we thrive more?”
What a difference that shift is in perception, both inside and outside a firm.
Samir Shah: Yep, totally. So, the next one is a little interesting. If you’ll visualize this with me for a second. A leaky bucket will kill your business. What I mean by that is, your business, think of it as a metal bucket. Customers are pouring in from the top, your successful, revenue’s increasing, all is well. Then, suddenly you spring a leak at the bottom of your bucket, and it’s the feature leak.
So, you don’t have certain features. We just lost a few customers because of that. Then a buggy leak, you’ve got bugs. Then, a competitor leak, then a pricing leak, then a relationship leak. Pretty soon, more starts leaking out then what’s coming in from the top, and that’ll kill your business.
But, take care of that. A leaky bucket’s going to kill your business, if you don’t watch it.
Patrick Stroth: So, you really have to watch those small things. Which, as revenues come in, it’s easy to overlook a little thing here, a little thing there, because, “Well, we’ve got a little revenue, so it’s offsetting that little loss.”
But, what you’re saying is they add up.
Samir Shah: Absolutely. Reckoning the revenue, churn, are extremely important things. So, start worrying about, from day one, as soon as you close that first customer. You’ve got to keep worrying about, “How else can I sell more to them? How can I make sure I keep them, and they don’t churn?”
Because, these things are going to kill your business with the downstream. You’re going to be all excited initially, but these are the things that become super important downstream.
Patrick Stroth: Got you.
Samir Shah: So, continuing with this whole water theme I have. I didn’t know I had this water theme, but continuing with a water theme. But, the next one, my final one, is that always go back to the well. There’s more there, and it’s almost free. What I mean by that is, grow that customer, land and expand. Increase your ACV’s with that customer, because it’s a beautiful thing.
You delight your customers enough, so that you can come back to them and sell them more stuff. It’s so much cheaper selling to them, quote on quote, selling to them, after you’ve made your first sale into them, and so much easier. So, go back to that well. There’s more there, and your customer acquisition costs are so low that it almost feels like it’s free.
Patrick Stroth: That helps with not only recurring revenue, but the opportunity costs saved because somebody who’s already trusted you with their business, and more importantly with their money. It’s a lower threshold of trust to go ahead and spend more money on you, if you’ve got more services or more offerings for them.
Samir Shah: Yeah, absolutely. Well put, yeah. That’s exactly what it is.
Patrick Stroth: All right. With Cervin Ventures, you guys are in the enterprise space. What do you look for?
Samir Shah: Yeah, so Cervin Ventures, we’re a leading seed enterprise venture fund. Where, what we’re doing is we’re discovering and funding first time entrepreneurs, up to a series A, and we help shape their journey from zero to ten million in revenue.
So, our focus, a very strong philosophical focus on operational support, business rigor. There are five of us in the partnership, and all of us are operators. We’ve either started companies, we’ve funded them, we’ve run them, we’ve honed them.
So, we really understand what it takes to go through that entire journey. We empathize with these founders and CEOs, and that’s what we focus on in our portfolio companies. Are typically B2B software, focused on infrastructure, vertical SaaS, dev ops tools. That’s our sweet spot.
Patrick Stroth: Where it’s all moving. This is where you’ve got these one-liners. You put them into practical use with benefiting your portfolio companies.
Samir Shah: Absolutely, day in and day out.
Patrick Stroth: Fantastic. Let’s see here. One other thing Samir. With our audience out there, I’m sure somebody’s going to want to reach out to you. How can people find you?
Samir Shah: Yeah, well our website is www.CervinVentures.com.
That’s spelled C-E-R-V-I-N Ventures dot com. They can always email me. I’m Samir@CervinVentures.com.
That’s S-A-M-I-R, at Cervin Ventures dot com. Please feel free to reach out to me, and I answer every email. So, that’s the best way.
Patrick Stroth: Very easy thing. Well, Samir, thank you very much. It’s been a pleasure, and as I said before, we will have these eight one-liners available on the podcast notes. But, I would also encourage you to reach out to Samir at Cervin Ventures, and I’m sure he can give you more insight into your particular issues, to see how any of these might apply to you.
Samir, thank you very much.
Samir Shah: Fantastic, thank you Patrick. I appreciate this.